CMS Issues Long Awaited Proposed “Sunshine” Rule

With the publication of the long awaited proposed “sunshine rule” regulations in the Federal Register on December 19, 2011, manufacturers of drugs, devices, biologicals and medical supplies finally will be able to more acccurately estimate the burden the new reporting requirements will have on them, provide comments to the proposed rule, and have their concerns addressed by CMS in the fnal rule.

CMS stated that the proposed sunshine rules will increase public awareness of financial relationships between drug and device manufacturers and certain health care providers, while Peter Budetti, M.D., CMS deputy administrator for Program Integrity, noted that “Disclosure of these relationships will discourage the inappropriate influence on clinical decision-making that sometimes occurs while still allowing legitimate partnerships.” At what costs these goals will be attained is yet to be determined.

The proposed rule would implement Social Security Act §1128G as added by §6002 Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). The proposed rule requires (1) manufacturers of drugs, devices, biologicals and medical supplies covered by Medicare, Medicaid, and the Children’s Health Insurance Program, referred to as applicable manufacturers, to report annually to the HHS Secretary any payments or other transfers of value (including gifts, consulting fees, research activities, speaking fees, meals, and travel) they make to physicians and teaching hospitals, referred to as covered recipients, and (2) manufacturers and group purchasing organizations (GPOs) to disclose physician (or the immediate family members of physicians) ownership or investment interests in such entities. The law does not require applicable manufacturers or applicable GPOs to report ownership or investment interests held by teaching hospitals.

The proposed rule, which focuses on research payments because collaboration between physicians and teaching hospitals, and manufacturers is essential to the development of new products, outlines procedures to ensure that the nature of these relationships is understood and provides for protection of applicable manufacturer’s competitive interests. To accomplish this, CMS would delay publication of certain research payments until the earlier of Food and Drug Administration’s (FDA)’s approval of the product that is the subject of the research for four years after the payment date. CMS has proposed to require manufacturers to report these payments in the year they are made, but would delay publication until the earlier of FDA approval or four years has passed.

CMS would be required to make the information about payments or other transfers of value from to physicians and teaching hospitals publicly available. Applicable manufacturers, applicable GPOs, covered recipients, and physician owners and investors would have at least 45 days to review and correct the information submitted before the information is posted. Physicians and teaching hospitals would be notified of the processes for this review through various methods of communication, including public postings and emails through CMS’ list serves. CMS has proposed to leave the resolution of disputes about the information reported to the applicable manufacturer or applicable GPO and the covered recipient or physician owner. If the dispute cannot be resolved, CMS would note the transaction as disputed, and both amounts will be published.

Under the law, violators of the reporting requirements will be subject to civil monetary penalties (CMPs), capped at $150,000 for failure to report, and $1,000,000 for knowing failure to report. Under the proposed rule, HHS Office of the Inspector General (OIG) and CMS would reserve the right to audit, evaluate, or inspect applicable manufacturers and applicable GPOs for their compliance with the reporting requirements. Applicable manufacturers and applicable GPOs would be required to maintain all records and documents for at least five years from the date the payment or other transfer of value or ownership or investment interest is published publicly on the website.

The statutory deadline for publishing regulations defining terms and providing instructions for compiling and submitting reports was October 1, 2011. Because of the delay in issuing the regulations, CMS would not begin data collection on January 1, 2012, and would not to require applicable manufacturers and applicable GPOs to begin collecting data until after a final rule is published. CMS, however, is considering whether to require applicable manufacturers and GPOs to submit partial year data for calendar year 2012 and has proposed that manufacturers and GPOs submit a partial year on March 31, 2013. This date, however, would depend upon the timing of the final rule. Once the data has been submitted, and the applicable manufacturers and recipients have had a 45-day period to confidentially review and, if necessary, correct the data, CMS would make the data publicly available by September 30, 2013.

Manufacturers of drugs, devices, biologicals and medical devices as well as physicians and teaching hospitals finally have an opportunity to evaluate and respond to the long awaited proposed regulations. CMS has solicited comments on how much time manufacturers and GPOs will need after a final rule is published to begin collecting data. Comments on the proposed rule will be accepted until February 17, 2012. CMS’ response to the comments will be included in a final rule to be published in 2012.